Sales of residential property doubled in December

Photo: Ukrainian photo

Successful depositors who withdrew their savings from banks decided to take a risk and invest their money into real estate. Over three weeks of December the sales of residential property doubled compared with the same period last year, Honorary President of the real estate development company Liko-Holding Ihor Lysov told Capital. He did not specify the exact number of apartments that the developer sold. “Since the middle of December, there are long lines of buyers willing to purchase apartments in new buildings. In fact, often the buyers were simply in a mad rush to buy any apartment that was offered for sale,” Director of the Kharkiv Real Estate Agency Svitlana Yakimova confirmed. An increase in demand has also been observed on the secondary real estate market, says Vice President of the Association of Professional Real Estate Managers Anatoliy Topal. At the moment, buyers are actively purchasing housing, which they plan to rent and possibly resell at a higher price in the future. According to his estimates, last year investment deals accounted for 6-7% of the total volume of residential property sales in Kyiv, while today their share has increased to 11-12%.

Real estate experts believe that the market can forget about such high activeness of buyers. The number of transactions and prices for residential property will gradually begin to fall.

Hysterical moods

At the moment, economy-class apartments priced at US $40,000-50,000 are being purchased most actively, says Topal. “For this amount a buyer can become the owner of a one-room apartment in a good district of the capital or a two-room apartment in a remote micro-district,” he added.

On the primary real estate market the most popular housing includes one-room apartments with an area of 50 sq m, two-room apartments (60-65 sq m) and three-room apartments (up to 100 sq m), adds Lysov.

The main reason for the hype is the sharp fluctuations of the hryvnia exchange rate: Ukrainians simply don’t know where to invest the money they withdrew from banks. According to the NBU, over February-November the volume of deposits of individuals in the national currency decreased by 13.3% (to UAH 202.5 bn) and in hard currency – by 42.5 % (to US $14.2 bn).

“There has been no hard currency available in the financial institutions for two weeks. The National Bank of Ukraine is not replenishing our cash desks,” a representative of one of the branches of Sberbank of Russia informed Capital. At the moment, dollars can be purchased on the black market on which the exchange rate substantially differs from the official rate. For instance, as of December 23, the black market rate was UAH 19.5/US $1.

Buyers are also attracted by the decrease in the prices of residential property in the dollar equivalent, while the real estate market is traditionally oriented towards the dollar exchange rate. Lysov notes that last year real estate on the primary market was sold at US $1,500/sq m, while today the price is US $800/sq m. Yakimova says that residential property offered at very low prices appeared on the real estate market of Kharkiv – one-room apartments are being offered for US $18,000-20,000. “This is the lowest price over the past decade,” she emphasized.

CEO of the Investment Trust Bank Oleksandr Podolyanko noted that the majority of potential buyers believe that after the situation in the country stabilizes the prices of real estate will soar. Many Ukrainians fear introduction of the 30% tax on unconfirmed incomes starting next year, adds Deputy Director for Marketing at the MiskZhytloBud construction company Angelina Derevleva. “That is why they are trying to purchase real estate this year,” she explains.

Sales will drop

Forecasts of experts of the real estate market for next year are pessimistic. “I am not expecting anything good,” admitted President of the Union of Real Estate Specialists Oleksandr Rubanov. He believes that the number of transactions on the market will drop insignificantly, while the prices of apartments on the secondary market will drop 20-30%.

In 2015, the number of mortgaged apartments, which banks will put up for sale on auction, will sharply increase, believes President of the Association of Bank Appraisal Specialists Serhiy Frolov. Some borrowers will not be able to service currency loans and bank liquidators will put residential property up for sale on auction. “The property owned by financial institutions will be sold at the minimum price,” he informed. Frolov believes that this could lead to a decrease of the average market price of residential property by 10-20% on average.